Soccer Club With 200 Fans Earns $14 Million From Transfers

By Alex Duff and Lucia Baldomir -
Mar 19, 2014

A Uruguayan soccer club led by a
U.K. racehorse owner has an unusual sideline: trading elite
South American players who never appear in a game.

Deportivo Maldonado SAD, which plays in Uruguay’s second-tier championship, was set up in 2010 when Malcolm Caine and
London-based lawyer Graham Shear became president and vice-president, according to company registry documents obtained by
Bloomberg News in Montevideo. Maldonado had previously operated
as a member-owned club since 1928.

Routing transfers through Uruguay can ease the tax burden
of investors who own player transfer rights, which is common in
South America, according to Ariel Reck, a lawyer in Buenos Aires
who works on transfer deals. Soccer ruling body FIFA’s
regulations allow players to be registered with three clubs in a
season and play for two, Reck said.

“Of course, this isn’t FIFA’s idea but it’s very
difficult” to distinguish between sporting and financial
reasons, Reck said by phone.

In what it called an unprecedented move, Zurich-based FIFA
said on March 5 it fined four Argentine teams between 15,000
Swiss francs ($17,160) and 50,000 Swiss francs for trading six
players through Uruguay’s Atletica Sud America for “reasons
that were not of a sporting nature.”

Caine, who co-owns a horse called Curbyourenthusiasm with
soccer player agent Jonathan Barnett, said in an e-mail that
Deportivo Maldonado operates “in exactly the same way as any
professionally run football club” and its trades are approved
by FIFA and Uruguay’s soccer federation.

Professionally Run

Unlike some other clubs, Deportivo Maldonado “pays its
players in accordance with the contractual obligations and fully
accounts for and performs all tax and other statutory
requirements,” Caine said.

Deportivo Maldonado earned 10.1 million euros ($14 million)
since 2011 by trading Brazil’s Alex Sandro to Porto and loaning
Paraguay’s Marcelo Estigarribia to Juventus, according to
regulatory filings. In January, it loaned another Brazilian,
Willian Jose da Silva, to Real Madrid. There is no record of the
three players appearing for Deportivo Maldonado, which last
season averaged 208 fans at its homes games, according to data
on soccer website transfermarkt.com.

Maldonado’s player-trading income is about double the
average first-division team in Uruguay over the same period,
transfermarkt.com data shows.

Caine didn’t directly respond to e-mailed questions about
Alex Sandro, Estigarribia and Da Silva being traded without
appearing in a match for Deportivo Maldonado, and didn’t return
phone calls seeking more information.

No Profits

He said in another e-mail that his group is helping develop
Deportivo Maldonado as a club, and hasn’t made any profit on its
investment yet.

“Our investment includes infrastructure, managerial,
technical know-how, medical and other facilities as well as
player development, training and player transfers,” Caine said.

Pictures on Deportivo Maldonado’s website show club
facilities, including a two-story prefabricated building and
concrete steps for seating at games. Maldonado is a town in
southeast Uruguay with a population of about 60,000 -- about 140
miles from Brazil’s border.

Shear, a lawyer at Berwin Leighton Paisner in London,
didn’t respond to two e-mails and two calls seeking comment.
Shear has previously represented Media Sports Investments, which
was involved in a dispute in 2007 when it owned the transfer
rights of Argentine striker Carlos Tevez at Premier League team
West Ham.

The other people who became Deportivo Maldonado’s directors
in 2010 were U.K. citizens David and Leon Caine, and Uruguayans
Carlos Fernando Bruschi and Mauro Caballero, documents show.

Real Player

In one of its latest trades, Deportivo Maldonado loaned Da
Silva to Real Madrid. The 22-year-old striker hadn’t appeared in
a game for Maldonado and last played for Santos, his agent Nick
Arcuri said by phone. Santos is among the biggest clubs in
Brazil’s first division.

Real Madrid negotiated the loan with Maldonado’s English
investors, said Arcuri, who declined to disclose his client’s
arrangement with them. The Spanish team has an option to sign Da
Silva, who has a market value of 1.5 million euros according to
transfermarkt.com.

Three Goals

Da Silva scored three times for Real Madrid’s B team in a
3-2 win at Recreativo Huelva on March 15.

In an effort to stop transfers via Uruguay, the government
last year increased the tax rate on player trades to 12.5
percent from 4 percent, Fernando Sobral, the treasurer of the
Uruguayan soccer federation, said by phone. Still, investors
don’t pay capital gains tax if they route income offshore
through a Uruguayan company, Reck said, adding they would pay a
35 percent rate in Argentina.

“I don’t know if FIFA has the appetite to stop” these
transactions, Reck said. “If it’s difficult for the FBI to
follow money around, imagine how hard it is for FIFA.”